There is a current of opinion that speaks of the economic crisis in which Romania found itself. But are we really in an economic crisis?” Rada Krachun asks in his personal blog.

First, it might be useful to define the term crisis. From my point of view, the simplest and most commonly accepted definition of a crisis would be “an adverse event for which you are completely unprepared.”

Adhering to proportion, the nanny’s announcement that she will not come to sit with the children 5 minutes before you leave for work is a crisis. The unexpected outbreak of the pandemic also created a crisis. The unimaginable collapse of major financial institutions in 2007 and 2008 spawned a financial and then an economic crisis. And examples can be continued.

Another important nuance. The fact that you anticipate, anticipate a negative development, but do nothing to prepare for it, has consequences similar to surprise.

In vain you expect that the babysitter will not come. If you do not find a replacement or an alternative solution in time, you will find yourself in the same crisis situation created by the element of surprise. At the moment, we are not yet faced with events that would generate an economic crisis.

Yes, we are in conditions of high inflation, which will not be easy to reduce. But let’s look around: at the dynamics of loans in the economy, at traffic jams at airports, at the number of cars on the streets, at the dynamics of consumption, etc. Nothing that is happening around us shows signs of an economic crisis.

However, it is no less true that we are in a situation where falling inflation due to aggressive interest rate hikes by central banks risks pushing developed countries into recession, creating a domino effect in the global economy. In addition, the possible termination of gas supply in winter may become a turning point from the point of view of economic development.

Read the full text on the Radu Krachun blog

Under these conditions, the question is how ready we are for such a development, and the answer is: not at all. We are practically in the scenario of the 2007-2008 period, when the economy is growing at the expense of large deficits financed from the outside: the current account deficit and the budget deficit. (And then at least I had a reason to be surprised…) The problem is that external flows are beyond the control of the Romanian state. As 2008 showed, when frightened investors close the faucet of external financing, you are left on your own and forced to knock on the door of multilateral financial institutions, which impose on you those reform measures that you could not implement on your own.

This is hardly a crisis for you. And not even because we will be caught off guard. Rather, because, despite the fact that a recession is expected, there are no measures to correct the imbalances. In this context, it is worth mentioning the recent remark of Governor Iserescu, which indicates pessimism about the willingness of investors to finance the budget deficit.

When a Bloomberg journalist pointed out that June was the worst month for the Ministry of Finance in terms of how it managed to get the necessary financing from the local market, his dry answer was: “So far.”